Apple wants 100 million streaming subscribers, but achieving that number may require some brutal competitive tactics. Which might just include colluding with major label partners like Universal Music Group into cutting free-access benefits for competitors like Spotify, according to investigations now initiated by state attorneys general in both New York and Connecticut.

“It’s important to ensure that the market continues to develop free from collusion and other anticompetitive practices.”

Statement of New York State Attorney General, Eric Schneiderman.

The investigations, filed by New York State attorney general Eric Schneiderman and Connecticut attorney general George Jepsen, accuse Apple of using subversive, crony dealmaking tactics with the major labels to severely handicap competitors like Spotify.

But this investigation is a complicated blessing for Spotify, a company equally guilty of soiling the sheets with the Big Three. Just recently, Spotify’s sordid negotiations with the major labels surfaced with the leak of its contract with Sony Music Entertainment, one that showed massive upfront payments, special advertising grants, and a general starvation plan for artists big and small.

Which brings this back to the initial accusation that majors are pressuring Spotify to curtail its free access, with Apple gently prodding the process. And they probably ain’t got shit on anyone: in a formal letter to the Office of the Attorney General of the State of New York, Universal Music Group attorneys penned a bit of well-mannered legal prose that smoothly denied everything.

“UMG does not currently have any agreements with Apple Inc. (i) to impede the availability of third-party free or ad-supported music streaming services, or (ii) that limit, restrict, or prevent UMG from licensing its recorded music repertoire to any third-party streaming service on any terms that UMG may choose. Nor does UMG intend to enter into any such music agreements.”

13 Responses

Wow, this seems completely backwards. The labels are abusing their monopoly power, not Apple!

We have 3 major labels that represent a clear monopoly. That’s not illegal in the USA, but using their monopoly powers to thwart competition and collusion certainly are.

So, these 3 labels have negotiated deals that are nearly identical (thank you favored nation clauses) with a number of new companies/services offering “music streaming” services. These monopolies used their existing catalogs to secure equity in these new companies and secure minimum revenue commitments. The terms of those deals effectively harm each of these label’s customers (aka the artists) but favor the labels themselves. Potentially, more favorable terms are being offered to some of these music streaming services in a manner that effectively allows these 3 labels to pick winners and losers in what is supposed to be a free marketplace.

Taken one step further, these 3 labels have perpetuated a system that is opaque to the point that it raises legitimate questions about their desire to compensate rights holders. There is literally no single authoritative record of the rights holders associated with every piece of music recorded in this country. Every private company effectively records this information within their own proprietary systems. Every artist effectively has to accept their label’s accounting or exercise audit rights that are often perceived as a nuclear option because these audits are often associated with lawsuits.

I believe there is an increasingly strong case that the major labels have abused their monopoly powers in their effort to control the impact that streaming music services have on their existing business. I also believe that any serious attempt at reform should include a centralized, standardized accounting of all rights holders. Ideally, consumption information about the number of plays/purchases for each work would also be included so that artist could truly have an independent accounting to determine if they are being paid fairly.

Finally someone was willing to do what needed to be done. The end result is all that matters. 3 months free and only $2.50 per month thereafter assuming $15 split 6 ways. This is the service everyone has been waiting for. The Netflix of music. Music subscriptions have been ridiculously overpriced all along. Digital music in general has been way overvalued and everyone even Apple knows it.

It’s too bad Apple couldn’t get the single subscription price down. $5 would have been right on. Maybe in time they will.

Evidently, by his statement, New York State Attorney General, Eric Schneiderman, is not quite familiar with the music industry, and should refer to statements made at numerous panel discussions held in Congress, including this one:
“ Surely the most striking feature of the current system is that there is no free market at work.” Senator Mike Lee, March 10th 2015